Sunday, September 13, 2009

(False ?) Report on ICICI Bank

The Economic Times reported on Sunday, the 13th Sept. that ICICI Bank's Rs.10,000 crore bad home loans are under lens. The amount alleged is huge even by ICICI Bank standards. The report talks of sale of bad home loan assets worth over Rs.10,000 crore by the bank to ARCIL (Asset Reconstruction Company of India Limited) of which ICICI Bank is a co-promoter. ICAI President was quoted as saying ," The regulator should re-audit assets sold to ARCIL". He is also supposed to have said,"In four cases , double loans were issued by ICICI Bank itself. This shows the inability of the bank's IT setup and its due diligence mechanism". Quite damning, if true.

It must have been an aweful Sunday for the bank. The bank has released a prominent advertisement in many newspapers (including a front page ad in the ET) on 14th Sept. calling the impugned article 'baseless'. The advertisement says, inter alia "1. ICAI has clarified that the statements attributed to it are totally incorrect, wrong and completely baseless. 2. The article is grossly inaccurate. The aggregate sales of home loans by the bank to ARCIL since inception are less than Rs.1,500 crore. 3. The article seeks to magnify a Rs.1 crore fraud committed on the bank into a major issue." The ad concludes, " The news item appears to be a deliberate and malicious plant aimed at damaging the bank's reputation. The bank is taking up the matter with regulatory and law enforcement authorities."It is obvious that the newspaper has gone overboard while publishing an obviously interesting matter. The Economic Times has not published any confirmation or retraction of the contentious report. A delayed response is still possible. In the meantime, the bank has been forced to shell out a lot of money to clarify the matter and has atleast temporarily suffered yet another knock to its reputation.There is an interesting matter of detail here. The report appeared on a Sunday and the bank had enough time to rebut before the stock market opened on Monday. What if the report had been published on a weekday and the bank had been forced to suffer a massive selloff of its shares before any denial could be disseminated?The newspaper owes it to its readers to explain in detail how it erred or who is to be blamed for the faux-pas. The denial issued by ICAI contains the following difficult-to-understand detail,

"For the purpose of setting the records right, we may mention that the fact of themater (sic) has been that when few Mumbai-based chartered accountants approachedthe ICAI President CA. Uttam Prakash Agarwal regarding the harassment beingmeted out to them, despite they being genuine buyers of the flats in the societyreferred to the news item, the latter had advised them to take up the matter withthe authorities in the Bank at their individual level. He had also assured them that iftheir plea is genuine and on getting the feedback from them about the authorities’response, he would take up the matter with the Bank and its regulator at the toplevel, if need be".